How to claim underpayment of wages in Australia

Guides

This information is for national system employees in Australia. It is general information only and is not a substitute for professional legal advice. You should obtain legal advice from a lawyer about your particular situation.

Key Takeaways

You have rights and options if you are not paid correctly. Escalating to the Fair Work Ombudsman or using the small claims procedure, gives you ways to recover unpaid wages from your employer.
You can claim underpayments from the past six years. This includes money owed from previous jobs, even if you’ve already left the employer.
Backpay helps Australian workers by reviewing your pay, calculating any underpayments, and guiding you through the process to claim your money.

What are my rights if I’ve been underpaid?

In Australia, employers are legally required to fix pay mistakes that result in you being underpaid. If you find out you haven’t been paid the full amount you’re entitled to, your employer must repay you the missing wages.

You don’t have to be underpaid right now, Australian law gives you the right to claim underpayments from the past six years.

How much could I claim in underpayments?

A common question is “How much money could I be owed?”

The answer is it depends on your role, how long you’ve been working and how compliant your employer has been with Australia’s minimum entitlement laws.

Let’s look at an example:

You’ve been working full-time as a Level 1 Shop Assistant. If your pay stayed at $23.38 from FY23, instead of increasing to $24.73 in FY 24 and $25.65 in FY24under the retail award, you’d be short at least $7,153 over the last two years.

As you can see, getting a few dollars less an hour might not seem like much, but it can add up to thousands over months and years.

How to calculate an underpayment

You need to calculate:

How much were you actually paid?
How much should you have been paid for the hours you worked?

The difference between these amounts is what you can claim as an underpayment.

Calculating underpayments is complicated and requires an expert level understanding of modern awards. For example, to calculate the amount someone is underpaid, you need to determine the award classification and base rate of pay, check for changes over time, and apply the correct rate for that date. You also have to go through timesheets carefully to add penalty rates and overtime rates, which can vary depending on the day, time, or total hours worked. In some cases, overtime is paid at a certain rate for the first two hours and then increases. Breaks and leave also need to be considered. Calculating these amounts over months or years is hard to do and highly prone to human error.

How to approach your employer about being underpaid

The first thing you should do after you’ve calculated your underpayment is to raise the issue with your employer. Your employer may not have realised that they didn't pay you the right amount and they may have made a genuine mistake.

Generally, you should approach your manager or supervisor first to arrange a private conversation about not being paid the right amount.

Spend some time preparing your thoughts and supporting documents (e.g. relevant clauses from your award or agreement, payslips or rosters). You can get a template to plan your conversation and practice in the Fair Work Ombudsman’s Difficult Conversations in the Workplace course here.

Document the discussion by recording the date, time, names, and any agreements reached. Send the summary to your employer to confirm what was agreed.

What to do if your employer won’t pay

If after talking to your employer you remain unpaid, here’s how you can escalate step-by-step:

Step 1: Send your employer a letter of demand

A letter of demand is a record of how much money you're owed, how you worked that out, and asks your employer to pay you within a reasonable time (usually 14 days). It should also make it clear to your employer what action you may take if they don't pay (e.g. you’ll escalate the matter to the Fair Work Ombudsman).

Unfortunately, there are no laws requiring your employer to get back to you. It could take them months to get back to you or hours of you chasing them. Try this method first, but understand it may not be the last step you take.

Your employer may offer to pay you a lower amount and may want you to sign a settlement agreement or deed of release. Agreements or deeds of release could include broad wording. You should get legal advice before signing, as you could be giving up other rights you have.

Step 2: Request assistance from the Fair Work Ombudsman (FWO)

If your employer ignores your letter of demand, or disagrees with the amount you are claiming, request assistance from the FWO by calling 13 13 94 or lodging an online enquiry through a My Account login.

FWO will make an initial assessment of your situation and the information you provide, and may:

provide information, education and advice
refer you to the Dispute Assistance service
investigate the matter
take no further action

What is the Dispute Assistance Service?

A Fair Work Officer provides phone-based support, speaking with you and your employer separately and then together to help everyone understand their rights and work towards resolving the dispute.

What is an investigation?

A Fair Work Inspector (FWI) collects and examines evidence to determine whether a breach of workplace laws has occurred. They may issue compliance notices, contravention letters, formal warnings and other measures to to inform employers of what needs to be done to fix the breach.

Keep in mind that Fair Work is on the side of holding employers accountable, but they have a broad remit and only investigate a small number of requests, prioritising cases that are serious, widespread.

Step 3: Take legal action in court

If the first steps don’t work then the final step is to bring a legal claim against your employer. You can start a court case in the Federal Circuit and Family Court of Australia (FCFCA) and in some state or territory magistrates and local courts.

Procedures, risks, and costs vary between the federal and state systems and also across states and territories. For example, filing fees differ, and in some courts, legal costs can be awarded.

Cases heard in these courts can also use the small claims procedure. The small claims process is quicker, cheaper and more informal than regular court proceedings.

If you go to court you will need to fill out forms and prepare evidence. You’ll also need to follow the court rules. For example, you may need to serve your employer correctly (giving them a copy of the forms by hand and keeping a record of what happened).

It may cost you money if you go to court. Most courts require you to pay filing fees upfront when you submit the forms (for the FCFCA its between $295 and $545, depending on the claim amount).

You may be required to attend mediation. At mediation, a neutral person (the 'mediator') will help you and your employer to talk to try and agree to a solution.

You should prepare if the case goes to a hearing or trial. You are the applicant so its your responsibility to prove your case. If you want to succeed, you need to be well prepared. Put all the documents related to your case together and keep them on hand, including:

a copy of your application and claim
a copy of your employment contract
a report / calculation of how much money your employer owes you
copies of your pay slips or bank statements
copies of your timesheets
a chronology (a list of events in order of when they occurred) and
copies of any written communications

At a hearing or trial a judge or magistrate will listen to you and your employer and look at the evidence. They will decide if your employer has to pay you and how much. Your employer may have to pay back all or some of your wages. Your employer may also have to pay a fine (penalty).

How long will it take?

It’s hard to judge how long and involved the steps for recovering your underpayment will be. It will vary depending on the amount and types of entitlements involved, seriousness and circumstances for the underpayment, the availability of evidence and the information you can provide.

Recover underpayments with Backpay

If you’ve worked for an employer for many months or years, you may find it difficult to manually calculate your underpayment. This is an issue faced by many workers and even employers who can make mistakes due to human error. Luckily, we have made it possible to run accurate calculations for all your shifts, in a fraction of the time.

Even if you’ve managed to work out your underpayment, recovering your money yourself can still be a long, complicated process. If you want to recover your money without going through all those steps yourself, you can do it through Backpay. When you give us permission to act on your behalf, we handle all the procedures for you. We will only get paid if you do.

Common questions about claiming underpayment of wages

Am I a national system employee?

You are generally a national system employee if your employer is an incorporated or trading company (like a Pty Ltd company). If your employer is a sole trader or you are a state public sector employee or local government employee, you usually belong to the the state system.

Independent contractors are not considered employees and don’t have the same rights and obligations. If you believe that you were incorrectly called an independent contractor, then some of these pathways would be open to you but first you need to prove that you were an employee. This is best handled by seeking legal advice.

What if I get in trouble for asking about my pay?

Your employer is not allowed to treat you badly because you have made a complaint or inquiry about wages or entitlements. If you are fired or some other negative action is taken against you, this is against the law. This is called adverse action or may be discrimination. Unfortunately this does happen sometimes. If so, please get legal help quickly.

What if my employer has no money to pay me?

If you are told or believe your employer will not have enough money to pay you, they will usually have to stop trading. In these situations, if a company is under the control of an administrator, receiver or liquidator, you can send your claim (details of what you are owed) to the administrator, receiver or liquidator.

The Australian Government may also be able to assist you under the Fair Entitlements Guarantee (FEG) if your employer declared bankruptcy or went into liquidation. You need to make a claim for unpaid wages and entitlements from FEG within 12 months from the date you were dismissed or the date your employer went bankrupt or into liquidation.

If you choose to use our recovery service , we will handle these situations and can contact the receiver or liquidator directly.

How far back can you claim underpayment of wages in Australia?

You have six years from the date of when you were underpaid to make a claim.

Understanding Your Overtime Rights